Financial Advisors in the Post Apocalyptic World

The sign in the bookshop window read: “Post Apocalyptic Fiction Has Now Been Moved to Current Events.”  You’ve probably seen that joke going around by e-mail.  Everyone had their view of normal life before the pandemic.  Most agree the “new normal” afterwards will be different.  Financial advisors fared better than most during the pandemic.  Suppose you faced a different apocalyptic event.  What would you do?

Many advisors did well because clients largely utilize asset based pricing.  The stock market did well.   Advisors were paid well as they kept in close touch with clients during the pandemic.

Here’s the scary apocalyptic scenario:  Major firms decided to stop paying advisors on client assets already on the books.  Advisors were only paid on new account relationships and new assets.  The recurring revenue stream was gone.  What would you do?

  1. Consider changing firms.  You might look to competitors.  Who still retained the old system of payouts?  If the industry gradually had to cut client fees to stay competitive with robo advisor platforms, everyone might be doing the same.
  2. Expand the household.  Proactive advisors would adapt.  They would find ways to open new accounts.  They would see every client with young children would get a college education account.  They would sell up to the clients parents and across to brothers, sisters, aunts and uncles.
  3. Consolidate assets.  Other proactive advisors would seek to get current clients bringing more money through the door.  They would focus on assets held away during annual review meetings.  They would make the case why orphaned assets should be all in one place.
  4. Focus on the clients inbound cash flow.  Plenty of attention would be given to when clients get their annual bonus payments.  Theis would be extrapolated to prospecting people at the same firm or industry.  They would look to clients owning businesses and start asking which competitors look like they might be ready to cash out. The idea is the bulk of the account would be established when the big cash event happens.     
  5. Deepening the relationship.  In this apocalyptic example, the major hit took place to asset based pricing and fee based accounts.  Insurance products might have been spared.  Lending products too.  Advisors would position themselves as one stop shopping destinations.  The logic would be “If you are happy doing investment business here, how about your other business too?”
  6. Working the system.  Many people have this skill.  Thinking ahead,. They would realize assets held by a client might not pay what they used to, but these clients have heirs.  They would start to develop closer relationships with the next generation.  They would discuss with clients the idea of distributing assets to the next generation during their lifetime.  In some cases, it might fit.  New client.  New account.  Precious payout.  Let’s assume it would take firms a little while to catch onto that one.
  7. Planting seeds.  Advisors might do some “pro bono” work, advising friends who aren’t earning much now, but will soon.  Friends in medical school are a good example.  It might take a few years, but soon they would have significantly higher income.  As it flowed into the firm, it would be fresh money.
  8. Low asset, high cash flow friends.  This includes prospects.  The industry is setup for advisors to look for pools of wealth.  There are plenty of people with high cash flows yet not possessing a huge amount in assets yet.  Advisors would cultivate them, knowing everything they send in on a monthly basis counts as new assets.
  9. Lots more prospecting.  Advisors would realize one advisors current client is another advisor’s new client.  They would identify wealthy prospects at competitors and prospect them.  The idea would be if they weren’t contributing significantly to that advisor’s bottom line, they weren’t getting much attention.
  10. Nonprofits.  Advisors would take steps to volunteer in the community, making the world a better place.  This would ;put them close to HNW individuals.  They would identify endowments and other pools of cash.  They would put forward proposals to manage it, bring it in as new money.

The common thread to all strategies (except #1) is bringing in new assets and opening lots of new accounts.  If you believe fee compression is here to stay, this is a good strategy to put into place immediately.

Related: 10 Ways to Get Prospects to Open Up